Tax expenditure denotes the various tax breaks such as exemptions, credits, abatements, among others that are granted to individuals, institutions and various agencies for the common objectives of promoting equity and other taxation principles. In other words, tax expenditures have the predictable impact of reducing the revenue base which, otherwise, would have been derived from the forgone taxes. The tax expenditure is guided by a budget and the implementation reports are availed under the auspices of the Office of Comptroller of Budget of the State of Illinois. According to the available information, in the fiscal year 2011 alone, state agencies reported two hundred and forty three breaks resulting into accumulated forgone revenues of U.S. Dollars 6.8 billion. The questions addressed by this paper are whether the State of Illinois prepares tax expenditure budgets and whether the budgets are accompanied by impact statements. At this juncture, it is essential to clarify that the budget refers to the proposals and are often drafted prior to the implementation of the fiscal year. The product that comes out after the completion of the fiscal year is an expenditure report, which essentially shows the deviation of the actual tax expenditures from the budget. It is imperative to get the distinction from the budget and the reports.
The dual questions are answered in the affirmative. Indeed, the State of Illinois prepares tax expenditure budgets and in the same vein prepares impact statements. The first limb of the questions concerns tax expenditure budget. The tax expenditure budget of the State of Illinois is drawn by various state agencies with the overall coordination under the Office of Comptroller. The office is charged with the task of availing the final tax expenditure budget. The preparation of the budget is all inclusive, involving relevant state departments and the Office of Comptroller, usually undertakes to incorporate the aspirations and wishes of various state departments and agencies.
Ordinarily, the overriding objective of the budget is to provide a conceptual framework and operating parameters from which tax breaks will be allocated. However, it is illustrative at this point to note that deviations often occur and the fact that the budget was prepared does not necessarily disallow slight deviation. The guiding principle often is the achievement of the overriding objective. However, deviations from the budget must be accounted for in the tax expenditure report, a task which falls within the province of the Office of the Comptroller.
Impact statements essentially denote the statements that estimate the likely effects of the tax expenditure on the affected constituency and the general economy. An impact statement would, therefore, address questions of relevance and importance of the tax expenditure. Indeed, the agencies with the coordination of the Office of Comptroller prepare impact statements to accompany the tax expenditure budgets. The role of the impact statement often is to offer a basic and a brief explanation for tax expenditure. In other words, to get an understanding of the tax expenditure budget, one needs to look at the impact statement accompanying one.The State of Illinois complies with this practise for the simple reasons of accountability and certainty. The preparation of the tax expenditure budget and the impact statement ensures accountability in fiscal and monetary execution and implementation. This can be attested through readership of the expenditure reports for completed fiscal years.
Musell, R. M. (2008). Understanding Government Budgets: A Practical Guide (illustrated ed.). London: Routledge.
Nowlan, J. D., Gove, S. i., & Winkel, R. J. (2010). Illinois Politics: A Citizen's Guide. Chicago: University of Illinois Press.